The 1996 case of ProCD v. Zeidenberg is one of the canonical cases in Internet law. It’s the African Eve of shrinkwrap, browsewrap, and clickwrap contracts. I’ve taught it; I’ve debated it. And, until yesterday, I didn’t know the whole story.

The facts of the case, as law students encounter them, are relatively simple. ProCD, in the words of the court, “compiled information from more than 3,000 telephone directories into a computer database … [that] cost more than $10 million to compile and is expensive to keep current.” It then sold copies of the database on CD-ROM: $150 for a five-disc set for personal use only, or a whole lot more for a set that allowed commercial use. Suddenly, the complete phone directory for the entire United States took up less shelf space than a Beatles boxed set.

Matthew Zeidenberg bought a copy of the cheapo personal-use version and decided to go into business competing with ProCD. He copied all 95 million entries out of the database and set up a web site where visitors could look up names and numbers in it. “[I]ts price …needless to say, is less than ProCD charges its commercial customers.” ProCD, seriously unhappy about being undercut with its own data, sued.

Zeidenberg figured that he had a pretty good defense: telephone listings are facts, and you can’t copyright facts. But ProCD ultimately got him, not on a copyright claim, but for breach of contract. You see, when you fire up your copy of ProCD’s directory-on-CD, it pops up a window that you have to click through:

The listings contained within this product are subject to a License Agreement. Please refer to the Help menu or to the User Guide.

And if one did look at the user guide, one would find, among other terms:

You will not make the Software or the Listings in whole or in part available to any other user in any networked or time-shared environment, or transfer the Listings in whole or in part to any computer other than the computer used to access the Listings.

What Zeidenberg was doing was about as blatant a violation of this term as one could commit, so the question was whether it was binding on him in the first place. The appeals court, in a ruling that has attracted fierce debate ever since, held first that yes, shrinkwrap agreements of this sort can be binding, even if you don’t get a chance to review the terms until after you’ve paid your money. You’re not quite taking your chances, the court explained, because if you don’t like the terms when you see them, you can get a refund.

(Actually offering refunds to people who don’t like the terms was a real hassle. Remember Microsoft Refund Day? Software retailers, in particular, hated to give refunds on software whose shrinkwrap had been broken. The rise of the web has mooted much of the issue. With direct software downloads, you can “show” people the terms and conditions before the transaction completes. And even with in-store purchases, you can still put the license terms on your web site, so that they don’t need to open the box to find out the terms.)

The second prong of the holding was that the uncopyrightability of ProCD’s listings was simply irrelevant. The copyright policy that facts can’t be copyrighted didn’t “preempt” the contract between ProCD and Zeidenberg. People can sign away rights that copyright or other laws give them, and as far as the court here was concerned, Zeidenberg had done just that.

This is all well and good (or bad), but it leaves open one quite intriguing question: where did ProCD get the numbers in the first place? Well, in the words of Carl Shapiro and Hal Varian’s Information Rules, page 23:

The phone companies wouldn’t rent their computerized listings to the CD companies at a reasonable price, since they didn’t want to cannibalize their $10 billion Yellow Pages service. So Pro CD hired Chinese workers to do the transcriptions in a Beijing factory, at a cost per worker of $3.50 per day. These Chinese workers typed in all the listings in every phone book in the United States—in fact, they typed them in twice to check for errors!

A few study questions:
* If ProCD can shrinkwrap-protect its CD-ROM directories, why can’t the phone companies do the same with their dead-tree directories?
* Is there something screwy about a system that encourages ProCD to spend $10 million to redigitize information that already existed in digital form?
* Given that ProCD won, why is it that you can look up telephone numbers online for free? (Hint: Did ProCD’s victory give it the ability to stop Zeidenberg from spending $10 million to open a Beijing transcription sweatshop?)
* Suppose that Zeidenberg emailed you a complete copy of the data he extracted from the ProCD database. Under the court’s reasoning, you would not be bound by the clickwrap agreement. Is this an argument for or against the decision? For or against giving ProCD a copyright-like power to stop you and Zeidenberg, whether or not there was a clickwrap agreement?
* The Google Book Search project also relies on extensive digitization of dead-tree-format information. Does Google strike you as being more like Zeidenberg, like ProCD, like the phone companies, or like the Chinese transcribers?